Trump Announces 100% Tariff on Key Patented Drugs on Liberation Day Anniversary

Overview of the Executive Order on Pharmaceutical Tariffs

President Donald Trump signed an executive order that could impose significant pharmaceutical tariffs, up to 100%, on some patented drugs from companies that fail to reach agreements with his administration. This move is part of a broader strategy to influence the pharmaceutical industry and bring manufacturing back to the United States.

Key Details of the Tariff Structure

The executive order outlines a tiered tariff system based on the actions of pharmaceutical companies:

• 0% Tariff: Companies that have signed a “most favored nation” pricing deal and are actively building facilities in the U.S. to onshore production of patented pharmaceuticals and their ingredients will face no tariffs.
• 20% Tariff: For those that don’t have a pricing deal but are building such projects in the U.S., a 20% tariff will apply, which will increase to 100% in four years.

A senior administration official mentioned that companies have months to negotiate before the 100% tariffs kick in — 120 days for bigger companies and 180 days for others. The official also noted that the administration has already reached 17 pricing deals with major drugmakers, 13 of which have been signed.

National Security Justification

In the order, Trump stated that the actions were necessary to address the “threatened impairment of the national security posed by imports of pharmaceuticals and pharmaceutical ingredients.” This justification aligns with previous measures taken by the administration, including the so-called Liberation Day tariffs, which were later overturned by the Supreme Court.

Reactions and Concerns

Industry leaders have expressed concerns about the potential consequences of these new tariffs. Stephen J. Ubl, CEO of PhRMA, warned that taxes on cutting-edge medicines could increase costs and jeopardize billions in U.S. investments. He emphasized that medicines sourced from other countries come overwhelmingly from reliable U.S. allies.

Trade Agreements with Major Countries

Beyond company-specific rates, several countries have reached trade frameworks with the U.S. to cap tariffs on drugs sent to the U.S.:

• The EU, Japan, Korea, and Switzerland will see a 15% U.S. tariff on patented pharmaceuticals, matching previously agreed rates for most goods.
• The U.K. will get a 10% tariff, which will reduce to zero under future trade agreements. The U.K. had previously secured a 0% tariff rate for all British medicines exported to the U.S. for at least three years.

Metal Tariff Updates

In addition to the pharmaceutical tariffs, Trump unveiled an update on his 50% tariffs on imported steel, aluminum, and copper. Starting Monday, the tariff rates on these metals will be calculated based on the “full customs value” of what U.S. customers pay when buying foreign metal. This change aims to prevent importers from escaping higher payments.

• Products fully made of steel, aluminum, and copper will continue to be tariffed at 50% for most countries.
• Derivative metals, or finished goods containing some of these metals, will now be subject to different tariff calculations:
• For products with metal that amounts to less than 15% of its entire weight (like the cap on a perfume bottle), only country-specific tariffs will apply.
• For products with more metal, such as a largely steel washing machine, a 25% tariff will apply to the whole value.

Sectoral Taxes and Legal Authority

Thursday’s orders reflect the latest example of Trump tapping into sectoral duties. The president used Section 232 of the 1962 Trade Expansion Act to impose the levies, the same authority he cited to slap import taxes on cars, lumber, and even kitchen cabinets. Many expect to see more product-specific import taxes down the road.

However, a recent Supreme Court ruling struck down tariffs Trump imposed using another law — the 1977 International Emergency Economic Powers Act — to immediately slap tariffs on any country, at nearly any level. Despite this setback, Trump still has options to keep taxing imports aggressively.

Additional Tariffs and Legal Challenges

Beyond sectoral levies, Trump also imposed a 10% tariff on all imports under a separate legal power mere hours after the Supreme Court’s ruling. However, this duty can only last for 150 days. Some two dozen states have already challenged the new tariffs.

Rationale Behind the Tariffs

Trump has argued that his steep new import taxes are necessary to bring back wealth that was “stolen” from the U.S. He claims they will narrow America’s decades-old trade deficit and bring manufacturing back to the country. However, critics point out that Trump has also turned to tariffs amid personal grudges or in response to political critics. Upending the global supply chain has proven costly for businesses and households already strained by rising prices.